WesletterSeptember 2011 Vol. No. 3 Investment and Planning Insights from WesbanA Quick Guide to Home Equity Loans money when needed via a credit card or special checks. Similar to a fixed-rate loan, the outstanding loan amount must be repaid in full at the end of the term. However, unlike a fixed-rate loan, HELOC interest rates float up If you as a consumer need an additional line of credit, a or down, generally adjusted based on the current prime home equity loan, also known as a second mortgage rate. A HELOC is a convenient way to cover short-term, where your home serves as collateral, is one of several recurring costs, such as quarterly tuition for a four-year options that you can choose from. There are two major college degree. advantages of home equity loans. First, the interest rate on home equity loans is usually lower than credit cards Although home equity loans do provide attractive rates and other consumer loans. Second, you can usually of financing, we caution consumers to think twice about deduct the interest on home equity loans, unlike other the reasons why one would need an additional line of loans. There are two types of home equity loans—fixed- credit. If you are thinking about using a home equity rate loans and lines of credit. loan for day-to-day expenses, one should examine whether you are overspending and possibly sinking A fixed-rate loan provides a single, lump-sum payment deeper into debt. If you end up taking out more money to the borrower, and is repaid over a fixed period of time than your house is worth, the interest paid on the loan at a pre-determined interest rate. This is useful if you above the value of the home is not tax deductible. know how much you would need and when you would be able to pay off the loan. A home equity line of credit (HELOC) is a variable rate loan that works like a credit card. Borrowers are pre- approved for a specific spending limit and can withdraw About Wesban The Wesban Team firstname.lastname@example.org Wesban provides financial 205-995-7778 planning and conservative www.wesban.com investment management designed to help families and small businesses grow, protect, and transfer wealth.
Wesban Financial Consultants, P.C. Investment and Planning Insights from Wesban September 2011 2Government Health-Care Spending: Advantage. More details about these benefits can be found in the attached table.Medicare Original Medicare’s relatively high cost-sharing provisions and lack of a limit on out-of-pocket spending can leave beneficiaries exposed to It is a well-known fact that the United States potentially devastating expenses in the case of a spends much more than other developed countries serious adverse health event. For this reason, most on health care, both in absolute dollars and as a Medicare beneficiaries also carry supplemental percentage of GDP. Two enormous, complicated insurance. Employer-sponsored retiree health programs, Medicare and Medicaid, account for plans, though becoming less common, still cover the majority of government health-care spending approximately 30% of the Medicare population. in the U.S. Both programs have been growing 20% of Medicare beneficiaries purchase rapidly, which is expected to continue in the individual supplemental policies, also called coming years. Medigap policies. Medicaid helps pay Medicare’s premiums and cost-sharing for another 20% of the Medicare and Medicaid were both created in the Medicare population. Only about 10% of mid-1960’s as part of Lyndon Johnson’s Great Medicare beneficiaries are estimated to be Society agenda. As of 1970, 62% of total health- completely without supplemental coverage. care spending was still private, with out-of-pocket spending the single most significant source. During the subsequent forty years, however, Medicare and Medicaid each expanded by more than 11% annually due to benefit expansions and demographic change, pushing public-sector spending up to nearly 50% of total health-care expenditures. During the same time, private- sector spending also grew at a robust 8.7% annually, as employer-sponsored insurance became the predominant conduit of health-care spending. Looking forward, the Centers for Medicare & Medicaid Services (CMS) project 6.5% annual health-care spending growth over the next decade. Public sector growth is again expected to outpace private spending growth, with a 6.9% growth rate compared to 6% for the private sector. Combined, Medicare and Medicaid are expected to account for 39% of U.S. health-care spending in 2019, up from 37% in 2010 and 17% in 1970. Medicare is a federal government program that provides health insurance to people over age 65, and people with certain disabilities. In 2009, more than 43 million people received health insurance benefits through Medicare at a total cost of approximately $510 billion. Medicare benefits are divided into three parts: Part A Hospital Insurance, Part B Medical Insurance, and Part D Prescription Drug Insurance. Part C created a private version of Medicare, now called Medicare
Wesban Financial Consultants, P.C. Investment and Planning Insights from Wesban September 2011 3Be a Better International Investor than their U.S. counterparts. As a result, the portfolio may take on an additional level of risk. If you need to rebalance your overseas portfolio International funds have received a lot of attention to reduce overall risk, or seek more foreign in recent years, and this should come as no exposure, consider conservative foreign surprise. For starters, it has become increasingly investment vehicles. Aggressive international common for investors to build multi-fund investments have a higher probability of incurring international portfolios rather than rely on damage during a prolonged downturn. Investing individual foreign offerings for all their overseas in conservative foreign funds can help balance exposure. Further, international funds have posted this risk. exceptional gains in recent years (except 2008). This may sound good if a significant part of your portfolio is devoted to international funds, but be sure the popularity and performance of overseas offerings hasn’t made you complacent. In fact, it’s just as important to periodically reexamine the parts of your portfolio that have done well and reevaluate the portions that have lagged. If you do take on international funds, remember to keep both your near-term expectations and your overseas exposure in check. You can also consider conservative foreign funds. The first step is to set reasonable expectations for the short- to mid-term prospects of international funds. The superior relative gains posted by various types of overseas offerings in recent years, with the exception of 2008, may not be sustainable in the long run. Given the superior performance of overseas offerings, check to see whether their overall foreign exposure exceeds the upper end of their international allocation range. A great portfolio performer can take on a larger percentage than you intended. Keeping an eye on your international allocation can help lower the overall risk of a portfolio. The illustration paints a rather clear picture of this. In 1970 this portfolio began with an equal allocation to international stocks, U.S. stocks, and U.S. bonds. However, due to the strong performance of international stocks during the 1980s and 1990s, allocation to this asset class jumped to 52%. While many might overlook this shift in international exposure, keep in mind that international stocks have historically been riskier